New Homeowner Bailouts Won't Work Either

Stop the Bailout! The best issue of a free-market economy is that messes like this will always work themselves out....over time, of course.

A SOLUTION TO THE FINANCIAL CRISIS The housing mortgage crisis is the main cause of the financial crisis. Real estate prices are determined by the affordable mortgage payment amount. For example, if the maximum affordable payment would buy an $800,000 house in 2005 at the original payment rate, then the sales price would be $800,000. If that same payment would buy a $200,000 house in 2008, then the sales price could only be $200,000. The maximum affordable payment determines the price of a house. The following solution is: 1. The US treasury buy stock of US banks to capitalize them, free up inter-bank lending and allow them to lend the money to consumers. 2. The US treasury should assume all adjustable rate mortgages written in the last 5 years and convert them to a 30 yr fixed rate at the loan origination payment rate (not the original note rate). 3 allow those mortgages to be assumable by new buyers. 4. eliminate the mark to market accounting rule. The original mortgage payment rate will eliminate almost all of the foreclosure problems. The assumption clause will allow the owners to easily sell their properties. The housing market would return to normal and the notes would be valued at near the original values. The US treasury would make incredible returns on the bank stock and the return of normal real estate values. Sincerely, Stan Sanders President of an asset management corp.

Why is the mere fact that your house, where you're raising your family and from which you interact with your community, is CURRENTLY "underwater", sufficient justification for a mortgagee to simply demand a renegotiation of his/her contractual obligations, including a reduction in principal and/or a reduction in interest rate, thus sticking the banks/taxpayers with their TEMPORARY "paper losses", morally justifiable. I have all the sympathy in the world for someone who is simply incapable of paying their mortgage because of job loss or medical bills, but if a mortgagee is able to continue paying - - even if it includes some "belt-tightening" - - then they should be held to their contract. P.S. I don't buy the claim that the banks "forced" these "sweet, innocent, uneducated lambs" to buy houses far larger than their budgets could afford, tricking them into taking 100% financing, (or forcing them to also get HELOCs, to drain further equity out of their real estate), at bargain interest rates that the borrowers thought would last forever, if only they "innocently" forged their financial statements.

I'm still at a complete loss as to how any of this affects the vast majority of mortgages which are in securitizations, where the servicer may or may not have the discretion to modify the terms of the mortgage. Offering a servicer $800 completely misses the point. They are paid a servicing fee from the holder of the mortgage, offering them more money doesn't affect one iota their legal ability to offer a modification of loan terms.

Being "underwater" may or may not lead to a default situation - Bad assumption #1 Homes will go well below current U.S. median of ~$200K - Bad assumption #2 People will be able to rent with bad credit or live somewhere else besides the home they left - Bad Assumption #3 Building Materials costs have no where to go but up from here, water resources and growing population along with reduced housing starts and declining inventory will decide the market value of housing and those putting big bets on home prices declining a lot more may be in for a shock.

I'm still at a complete loss as to how any of this affects the vast majority of mortgages which are in securitizations, where the servicer may or may not have the discretion to modify the terms of the mortgage. Offering a servicer $800 completely misses the point. They are paid a servicing fee from the holder of the mortgage, offering them more money doesn't affect one iota their legal ability to offer a modification of loan terms.

The idea that you have to be in trouble to get this relief is just setting up people to go bad for a few months. Anyone that has no equity will do this just to get a lower rate. Also if you have any equity your forced to sell. This is taking the good taxpayer and pitting them against the bad Taxpayer. Plus this does nothing for Jumbo Mortgages. THis is not the fix. We are rewarding and encourging bad conduct. It would be better to just let everyone default and then try and buy at some later point in time. WE ALSO NEED SOMETHING ON THE OTHER END if we dont start selling the already BANK OWNED properties we will just sit static. Say your Prayers and Thank God we have Obama to blame the future on.

This mess was created by the lack of respect for the capitalist "there aint no free lunch", ie everyone should own their own home whether they can afford it or not. The "solutions" are simply more of the same. The "cure" is in fact the disease.

Did you ever think you wolud see this day? The American taxpayers "have to" retake control of our government. The government is suppose to represent the people, not the lobbist and business power brokers of America. The no brainer is "TERM LIMITS" as Senators and in the Congress. There is a simple reason for two terms for the office of the President. Duh!!!! The more they attempt to fix it, the more screwed up it will get. A band-aid does not do much for terminal bleeding. For starters, we must run the pundits in office, out of office. The government must answer to the taxpayers. If they are bankers, they are lying. If they are Congressmen and Senators, send them to Iraq. If they are lawyers, they should not a part of our government. Doesn't it seem like a conflict of interest??? Did you ever trust a lawyer?

How come no one is asking the irresponsible purchasers who spent beyond their means to step up and take responsibility for their actions. I don't mind helping those in need. I just have a problem helping those who live beyond their means. I wanted a big house, too. However, I bought one I could afford. Now I have to help those who were less responsible. I must admit I am angry over it. I think this hole that we (Americans) have dug is going to take longer to fix than most people realize!

How about offering an incentive for people paying their payments ontime? It is clear housing we purchased was over valued, for those of us who are current and struggling mightily to stay so, let see some form of a credit for staying in our house and not becoming another needy hand. If I stay in my house, which is 20% underwater after writing off my 20% down, and make my payments ontime for the next five years, lets see a 5% reduction in the principle balance. This would provide time for most if not all of the value of the home to be restored, assuming a 5% increase in home values in years 2-5. In this manner, I have to eat the 20% for buying an overvalued asset and the bank eats a 5% loss on transaction but see more positive consumer behavior across the responsible base of 'good' customer it should want to maintain.

I bought a house at a forclosure auction in july,,,guy bought the house new for 158,000 in Nov 2008,, borrowed 157,000 the same day,,,,did a little work on the property then abandoned it,, i paid 60,000....and am starting to wonder if i paid too much....

The bail out money is supposed to loosen the purse strings and get banks loaning money again. Who are they going to loan to. People with good credit and good sense are not going to borrow wildly. They never did, and especially not now in a retreating economy. So who are the banks supposed to lend to? The banks are going to hold on to the money not because the want to but because there is no one to lend to. No one will borrow except the ones who won't qualify under normal traditional terms, 20% down, stable job and income, etc..

I read lots of the comments, whats sad is the banks gave these lovely loans called interest only and ARMs, I live in Phoenix where the market was great, but tanked so bad now, I have to re-fi my interest only loan in 3yrs which I wont be able to do because the home is now below an apprasied value. I make great money and could afford a conv loan, but I planned to have the home for a few yrs and then move on to something else..call it greed call it what you want, but the thing is the majority or the US did this, now we are all screwed, I am planning on letting the home go, for the simple fact, I am paying interest only on a loan that is on a decline..I am digging a hole

Gloom and doom? If a person has a compound fracture, calling it a little scratch will not change the fact that it's a compound fracture. Our economy is fractured. Telling everyone that the economy is fundamentally sound and resilient will not stop the bleeding. It's news because it's actually happening.

@angiandchip and @all believers in the products & services of the giant megabusiness "church": this is all popaganda! don't you know that god & the bible are manmade by the rich & mighty to suppress the weak & poor? they are licenced, financed & supported to promise heaven above later and threaten with hellfire below. and all the obedient sheep are consoled by hollow, cheap but big talk of how they would be rewarded and the others punished. they say don't kill, don't steal! but those who kill thousands & steal billions are the blessed ones. wake up NOW and do't wait until 'judgement day'.....

Is now a good time to buy? Or should we hold out?

Volatility is the new black. 1. What's the difference what the house is worth? You have a mortgage that you signed saying you could afford the monthly payment, you have to live somewhere. If your a speculator you get what you deserve. Housing was stable until 1998 when this speculation mess started. 2. Get used to it. Commodities (oil, food, raw materials), stocks, interest rates, housing, and prices of everything are going to bounce all over the place going forward as everyone speculates on them. There's to much money sloshing around the world with nowhere to make that that unnatural 25% annual return these piranhas are used to. 3. Live on half your NET income and invest the other half in 4.5% laddered CDs and you'll sleep better. 4. Taxes can only go up in the future. It's a fact. Someone's going to have to pay for this crime, and as always it will be USA Inc.'s employees, the tax payers. 5. Good luck!

There is a very simple solution to all of this: all principal on mortgages in the U.S. should be decreased by 25%. Going forward, all loans have the same payments left, plus any months that are behind. And all loans are out of foreclosure. Everyone starts out current again. Mortgages have been over-inflated by the banks in the first place so they could make more interest off the properties. The housing market has finally adjusted to this - the paper written on these properties needs to adjust as well. I find it ridiculous that the government wants to bail out the financial institutions, but leave the public on the hook for their bad business decisions!!!!!!

With 5-6 million more foreclosures coming in the next 12-18 months wait and save money for your down payment, prices still have another 15%-25% of downside. If you want to know what a house will ultimately be worth in real dollars look up the sale price of the house (on your counties website) in 1998 and you'll be close. That's when stuff starting spiraling up & out of control. If you can't find a 1998 price find one anytime before that and add 3-5% a year up to 1998 and give them an offer. If it's priced less than that it's probably a deal if there isn't 6 foreclosures and 3 crack houses on the block. :-)